Controversy: City attorney candidate says he told panel Clinton administration did not influence his decision to hire Webster Hubbell as a lobbyist.

LITTLE ROCK, ARK. — Shedding little light on the Whitewater land scandal but fueling controversy in Los Angeles city politics, Encino lawyer-developer Ted Stein testified before a federal grand jury for more than an hour and a half Thursday about his 1994 hiring of Webster L. Hubbell as a lobbyist for Los Angeles International Airport.

Stein, a former Airport Commission president who is running for Los Angeles city attorney in the April 8 election, said after emerging from the federal courthouse here that the Clinton administration was never mentioned when Hubbell--a friend of the president and former associate attorney general-- was recommended for the job.

Special prosecutor Kenneth Starr appears to be focusing, Stein said, on whether Hubbell ever did the work for which he was paid nearly $25,000. Stein insisted Thursday that when he submitted Hubbell's request for payment he believed it was justified, though he now is unsure. In an unusual arrangement, Hubbell was hired on a monthly retainer of $8,250, rather than being paid an hourly rate.

Hubbell is finishing a 21-month federal prison term for defrauding his partners and clients while working at Little Rock's Rose Law Firm. After he resigned from the Clinton administration, Stein hired him in August 1994 to help convince federal officials that LAX should be allowed to transfer $58 million from the airport to the city's general fund.

"Did he earn his money, is the unanswered question," Stein told a throng of reporters, including five television news crews, who staked out the courthouse until he emerged from testifying at about 3:30 p.m. "We got the money, the $58 million, the transfer. It's difficult to ascertain [Hubbell's] role in getting that permission to transfer the $58 million."

In justifying his work, Hubbell said he was in "daily contact" with Stein, "constant contact" with the city's Washington lawyers and "almost daily contact" with officials at the Department of Transportation.

But legal bills from the city's attorneys do not reflect repeated phone conversations with Hubbell, and DOT officials have denied talking much with him. Stein said in a telephone interview Thursday that he spoke with Hubbell 15 or 20 times during a three-month period, and saw little difference between that and the "daily contact" Hubbell had claimed.

"You're nit-picking that word--he was in contact with me on a regular basis," Stein said. "I had no reason to believe that anything that was in Mr. Hubbell's letter was not correct."

Stein also said Thursday that he set the contract at $49,500--just below the $50,000 level which would require approval of the full Airport Commission and invite scrutiny by the City Council--to keep the fact that LAX was hiring a lobbyist secret from the airline industry.

In addition to the LAX contract, Starr's office is examining how Hubbell came to land two other consulting deals between his departure from the Justice Department in spring of 1994 and his guilty plea that December. Hubbell was paid $45,000 by a nonprofit foundation for articles he never wrote, and was retained by a unit of Indonesia's Lippo financial group.

Stein said that two witnesses connected to those transactions, John Phillips and Bob Wolf, preceded him as witnesses Thursday. Other people connected with the LAX contract testified last month.

A key question for the special prosecutor is whether the Clinton administration helped Hubbell get the consulting jobs. Stein said he testified Thursday that Alan Arkatov, a former Democratic political consultant, recommended Hubbell to him. He previously has said former Los Angeles Deputy Mayor Mary Leslie, a Clinton fund-raiser who is married to Arkatov, also suggested Hubbell.

"I hired Mr. Hubbell in August 1994. Prior to that I wouldn't have known him if I tripped over him," Stein said.

"I was asked a series of questions as to whether other names came up, did anybody ever mention to me the president or the first lady [or former U.S. Trade Representative Mickey Kantor]. The answer to all of those questions was negative."

Stein noted that both Arkatov and Leslie had worked on campaigns for his opponent, City Atty. James K. Hahn, and that Hahn's deputy had signed off on the expenditures.

"Who recommended [Hubbell] is irrelevant. What's relevant is Ted Stein's irresponsible oversight of this fiasco," said Hahn campaign manager Matt Middlebrook, adding that neither Arkatov nor Leslie currently has a formal role in Hahn's reelection bid, though both have given him money and Leslie was recently named one of three finance chairs.

"The heart of the matter is the fact that Ted Stein appears to have submitted fraudulent documents to the city for payment of Webb Hubbell," Middlebrook added. "It speaks to his honesty, and it may very well be a crime."

Regarding Hahn's deputy who signed the requests for payment, Middlebrook said the lawyer reviews hundreds of similar documents routinely, and "was going on faith that high-ranking officials are going to provide accurate information."

Back in Little Rock, Stein joked about the two days of fund-raising he had missed by traveling to testify, and about his inability to draw as much press attention for campaign events.

"I find it somewhat surprising that I'm 2,000 miles away from home and I find one, two, three, four, five cameras," he said. "I only wish we had this much coverage of the city attorney's race in Los Angeles."